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E-2 Versus EB-5: Both Investor Visas, But Very Different

Oliver Yang and I recently completed our respective trips to China during which investors had great interest in the E-2 visa option and much less interest in EB-5. This was not surprising given the well‑publicized EB-5 quota backlogs for investors born in China.

Since investors in China are very familiar with EB-5, and only now becoming familiar with E-2, I am publishing this blog to explain the differences between E-2 and EB-5 as we explained to the investors and agents with whom we met.

Visa vs. Green Card

E-2 is a visa, not a green card. However, it is the longest-term visa and, in many ways, the most advantageous visa to the U.S. It is a visa that can be obtained for 5 years and extended 5 years at a time indefinitely. It is a visa that allows children to go to public school, private school or university, often with in-state tuition. It is a visa that allows the spouse to work anywhere that he or she wishes in the U.S. However, it is still a visa. On the other hand, the EB-5 approval leads to a green card, which can lead to U.S. citizenship. Investors who wish to do so, can use their E-2 investment as a down payment for an EB-5 investment if they want to eventually qualify for a green card.

Timing

The E-2 visa can be obtained quickly – – usually within 2 months. There is no quota and therefore no backlog. The EB-5 is subject to a quota, which presently has a backlog estimated to be in excess of 10 years for China.

Taxation

Green cards obtained through EB-5 (and green cards obtained through any other category) subject the foreign national to U.S. taxation on worldwide income. E-2 visa holders can avoid taxation on worldwide income by reducing the number of days that they spend in the U.S.

Exact vs. Flexible Requirements

EB-5 has very exact requirements. In most cases, it requires an investment of $500,000 and creation of at least 10 full-time jobs for U.S. workers.

E-2 has no exact requirements. It requires a “substantial” investment, which is not defined by any specific dollar amount. Rather, it is defined by the amount necessary for the type of business in which the investor invests to be successful. Many E-2 investments are $200,000 or more, although in certain businesses it may be possible to show that a business can be profitable, employ people and expand with a smaller investment. Often, larger investments result in longer lasting and more profitable businesses.

The job creation requirement utilizes the same philosophy as the investment requirement. The E-2 investor’s business should employ people, but the amount of employment is dependent upon the type of business. Generally, the investor wants to prove, through a good business plan, that he or she will employ the normal amount of employees necessary for similar businesses to succeed.

Place of Filing

EB-5 petitions, like virtually all working visa petitions, must be approved by USCIS before an applicant can file for the visa at the U.S. Consulate. The E-2 is the exception. The E-2 applicant never has to file any application with USCIS, which has produced unprecedentedly restrictive interpretations in many working visa applications. Rather, the E-2 application is filed directly at a U.S. Consulate, which may be a U.S. consulate in the country of birth, the country of citizenship (the U.S. Consulate in Barbados has jurisdiction over Grenada citizens), a U.S. consulate in a country of residence or any U.S. consulate anywhere in the world that is willing to take on the case.

Because there is no pre-approved petition by USCIS, the interview at the U.S. consulate is especially critical. It is for that reason that we prepare clients meticulously for the questions likely to be asked at the E-2 visa interview.

Country of Birth vs. Country of Citizenship

EB-5 is available for people born in any country around the world. The quota is based on country of birth, not country of citizenship. The E-2 is based on country of citizenship. Since there is no investment treaty between the U.S. and China, people born in China are not eligible for the E-2 visa unless they obtain citizenship in a country that has an investment treaty with the U.S. The only country in which citizenship can be obtained relatively quickly (usually within 4 months) based on investment, and which has an investment treaty with the U.S., is Grenada.

Ownership of Business

EB-5 does not require any specific percentage ownership of a business in the U.S. The E-2 visa does require that the investor own at least 50% of the business in which he invests in order to qualify as an E-2 investor. If other nationals of the treaty country own at least 50% of the business, but the investor does not, the investor may be able to qualify for an E-2 managerial visa.

Time Spent in the U.S.

With U.S. permanent resident status, it necessary for a foreign national to reside in the U.S., which usually means spending at least 50% of the time in the U.S. If he or she does not do so, it may be possible to obtain a re-entry permit for a 2-year period in order in order to avoid abandonment of permanent resident status.

The E-2 visa holder can spend 100% of his or her time in the U.S. or very little time in the U.S., as he or she prefers. As mentioned earlier, spending less time in the U.S. may avoid taxation on worldwide income.

For some people, the advantages of the E-2 visa make the EB-5 process unnecessary. For others, the E-2 provides a good method to spend the EB-5 waiting period in the U.S.

The material contained in this article does not constitute direct legal advice and is for informational purposes only. An attorney-client relationship is not presumed or intended by receipt or review of this presentation. The information provided should never replace informed counsel when specific immigration-related guidance is needed.